MedTech- JNJ 2Q Read- US Ortho & Surgery Vol. Trends/Commentary Shld Alleviate Some Recently Elevated 2Q Investor Angst

Research evidence excerpt

MedTech- JNJ 2Q Read- US Ortho & Surgery Vol. Trends/Commentary Shld Alleviate Some Recently Elevated 2Q Investor Angst

tribute 2Q MedTech performance to any

✓ Sector Update systemic procedure slowdown. We view the volumes commentary as balanced-to-+ve

for broader MedTech and generally consistent w/takeaways from our 2Q hospital survey

[HERE], which suggested tempered but stable trends (smaller q/q utilization pick-up vs.

prior years, steady capex). JNJ's MedTech growth is expected to accelerate in 2H vs.

1H’s (excl. the 100bps benefit from the 53rd week). The MedTech margin ticked down

to 22.0% from 22.2% on commercial/R&D investment and tariffs, though was partially

offset by favorable operational drivers and FX. Mgmt. also reiterated DePuy (Ortho)

separation timing (mid-2027), noting it continues to evaluate “all separation options,”

w/ updates later this year and a longer-term outlook at the Dec. 8 Enterprise Business

Review. Our view that Ortho sales-force disruption risk represents a competitive oppty

for other players is unchanged, and we continue to think RemainCo MedTech will remain

a significant consolidator of assets via M&A.

Cardiovascular fell short of CNS (3.1% op vs. CNS 8.1%; ~$2.40B vs. CNS $2.54B)

w/misses in both EP and Abiomed, partially offset by another strong Shockwave

qtr. (14.7% op). Overall EP rev. of $1.53B grew 3.1% op with the shortfall concentrated

OUS: US EP of $783M (5.8%) came in just below CNS ($793M, 7.1%), while OUS

EP of $749M (0.4%) missed CNS ($783M, 3.1%) on a ~400bps China inventory drag

that mgmt. said would have otherwise taken global EP growth above 7%. Notably,

US EP accelerated on a 2-yr stack basis to ~10.9% from 6.5% in 1Q, and mgmt.

reiterated strong underlying demand: at the margin this print reads better for the PFA